The Problem with Relying on Profit-Driven Models to Produce Pandemic Drugs

The longstanding problems of relying on a market response to a pandemic are becoming readily apparent in the United States, which has quickly become the epicenter of the COVID-19 outbreak. The problems are particularly pronounced in pharmaceutical markets, where we are pinning our hopes for both cures and vaccines. In previous work we have shown how characteristics of healthcare markets in the United States create a divergence between the private incentives of for-profit companies and public health needs, leading to sub-optimal health outcomes in what is a uniquely market-driven healthcare system. In this Essay, written as the COVID-19 pandemic unfolds, we illustrate how this divergence of private incentives from public health needs widens in contexts of pandemic preparedness and pandemic response. The Essay begins by explaining why the design of pharmaceutical markets in the United States yields suboptimal and sometimes even negative health outcomes. The Essay then follows the trajectory of the drug remdesivir as a case study that illustrates the consequences of relying on profit-driven pharmaceutical research and development (R&D) models for pandemic preparedness and response. We conclude that, contrary to what many commentators suggest, government policy responses to pandemic threats that rely primarily on increasing private market incentives within our existing pharmaceutical markets are unlikely to yield pandemic treatments that meet public healthcare needs. Policy interventions should instead be designed in ways that narrow the divergence of private interests from public health needs, especially in pandemic contexts. Achieving this will likely require greater public-sector involvement in pharmaceutical R&D.

Keywords: COVID-19, coronavirus, SARS-CoV-2, pandemic, pharmaceuticals, vaccines, healthcare markets, incentives, for-profit, public health, innovation, remdesivir, Food and Drug Administration, FDA, Gilead, Ebola, SARS, MERS, preparedness, private public partnerships, PPPs, emergency response

Suggested Citation: Suggested Citation

Heled, Yaniv and Santos Rutschman, Ana and Vertinsky, Liza, The Problem with Relying on Profit-Driven Models to Produce Pandemic Drugs (June 30, 2020). Journal of Law & Biosciences, vol. 7, 2020, Saint Louis U. Legal Studies Research Paper No. 2020-17, Georgia State University College of Law, Legal Studies Research Paper No. 2021-03, Available at SSRN: https://ssrn.com/abstract=3645130 or http://dx.doi.org/10.2139/ssrn.3645130